PHH closes C$383 million notes offering backed by Canadian fleet lease assets

February 02, 2010

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On January 27, 2010, PHH Vehicle Management Services Inc., the indirect wholly owned Canadian fleet management unit of PHH Corporation, closed a series of transactions with Fleet Leasing Receivables Trust (FLRT). FLRT issued and sold about C$363 million of senior Series 2010-1 Asset-Backed Notes backed by the PHH fleet lease assets. See the full press release here.

 FLRT is a Canadian special purpose trust established and administered by PHH Vehicle Management Services or its affiliates for the purpose of acquiring, disposing of and administering fleet leases and borrowing funds or issuing securities to finance the acquisition of such assets.

High ratings. FLRT issued two tranches of Class A-1 Notes for aggregate proceeds of approximately C$126 million, both tranches being rated R-1(high) and P-1 by DBRS and Moody's Investors Service ("Moody's"), respectively. In addition, FLRT issued two tranches of Class A-2 Notes for aggregate proceeds of approximately C$237 million, both tranches being rated AAA and Aaa by DBRS and Moody's, respectively.

 Innovative deal. According to Barry Critchley, writing in the Financial Post, “Fleet Leasing Receivables Trust, a special purpose trust and a new entrant to the ABS world, closed a $363-million transaction yesterday. The deal, based on commercial fleet leases originated by PHH Vehicle Management Services, is noteworthy because it ended up as a hybrid, meaning that the Business Development Bank of Canada, the agent for the $12-billion Canadian Secured Credit Facility, purchased a mere 25% of what was on offer. The bulk of the issue, the remaining $272-million, and which was split between two classes of notes, was purchased by institutional investors. This deal marks the first time since the federal government set up CSCF last year that the BDC has had co-investors on any of its transactions.”

Flexibility and diversity. This issue enhances PHH Corporation’s flexibility and diversity in its funding sources. Jerome Selitto, president and chief executive officer of PHH Corporation, said, “The reestablishment of a Canadian lease securitization program has been a key part of our overall financing strategy to diversify PHH's funding sources and to maintain sufficient and appropriate liquidity to support our businesses while reducing borrowings under our revolving credit facility.”

First to market. PHH Arval and its affiliates were the first to provide this type of innovative funding solution in Canada. George J. Kilroy, President of PHH Arval, stated: "We remain encouraged by the improvements we have seen over the last twelve months in asset backed securities markets, both in Canada and the U.S., and the demand for securities backed by PHH fleet assets. Our Company continues to solidify its position as a leading provider of financing solutions for the commercial fleet industry throughout North America. We committed to providing a lease product to our fleet management clients that is consistent with our outstanding client service and award winning technology and innovation, and we have delivered in both Canada and the U.S."

Tags:   Funding